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FINANCIAL OPERATIONS
WHY?
AIA
To Stay in Business
Are we making Profit?
Enough to cover Payro l l & expenses
Set as ide upgrade funds
Pr ice- to stay in bus iness & del iver qual i ty Serv ice
1. Financial Systems
2. Financial Planning
4. Acquiring Capital
3. Financial Health
SOURCES & USES OF FUNDS:
>Revenues- f rom Pro jects
>Capi ta l in fus ions
>Any assoc iated bus iness ventures
>Misc Sources
FINANCIAL SYSTEMS
1
SOU RCES & U SES OF FU NDS :
>D i rec t Exp enses - sup po r t p ro jec t ac t i v i t i e s-S a la ry & Co nsu l tan t
expenses
>S a la ry - t im e cha rg ed b y S t aff
>C o nsu l tan t s - o u t s i d e se rv i ce w / mark -up
>O ther expenses - t r ave l , pho ne , e t c .
FINANCIAL SYSTEMS
SOURCES & USES OF FUNDS:
>InDirect Expenses- Ind i rect ly supports Pro j
-payrol l burden & Admin costs
>Payrol l burden- benefits
>Admin costs-management, market ingeduc. Etc
-rents, taxes (2.5 x DSE)
FINANCIAL SYSTEMS
SOURCES & USES OF FUNDS:
>Profit - Difference of Revenues & expenses
-susta ins pract ice-cushion for lean t imes-reward-funds for investments
FINANCIAL SYSTEMS
ACCOUNTING SYSTEMS:
Project & Genera l Account ing
Proj . Acctg- Labor , other d i rect expenses+overhead Expense (%)or 150%
Gen. acctg- keeping acctg books
FINANCIAL SYSTEMS
ACCOUNTING SYSTEMS:
>Chart of accounts
>Assets-Owned by the Fi rm (Car, Condo, Office, equipts)
>Liabi l i t ies - What firm owes to others
FINANCIAL SYSTEMS
ACCOUNTING SYSTEMS:
>Net worth - what firm owes to the owner
>Revenue- Money earned dur ing acctg per iod
>Expenses- Fi rm’s Cost to produce revenue
>Profit or Loss - d ifference of revenue & expenses
FINANCIAL SYSTEMS
ACCOUNTING METHODS:
>CASH & ACCRUAL METHOD
>Cash Methods- what cash on hand
>Accrual Method- Revenue records even not yet received
FINANCIAL SYSTEMS
FINANCIAL REPORTS:
>Income Statement- moving picture-summary for a part icu lar
per iod
>Balance Sheet – snapshot-net worth at a part icu lar
t ime
FINANCIAL SYSTEMS
-Sets Target for pr ic ing & operat ing costs
-Effect ive way- sets guideposts: profit targets , staffing needs
& costs in provid ing the level of service
FINANCIAL PLANNING:
2
Business P lanning
>Act ive instead of React ive
“Big Picture”
>Annual Financia l P lans:-Revenue Pro ject ion-Staffing Plan-Overhead Cost-Profit p lan
FINANCIAL PLANNING:
Revenue Pro ject ion
- OnGoing Pro j
- Upcoming Pro j
F INANCIAL PLANNING:
Staffing Expense
- Current
- Future Hi r ing
FINANCIAL PLANNING:
-Cont inual ly assess to stay heal thy-to achieve pract ice goals
>To check: 1. stay in Bus iness2. fu lfi l l promise to c l ients3. fu lfi l l own pract ice4. provide rewards-performance,
r isk , ROI
F INANCIAL HEALTH:
3
3 Factors in Financia l P lanning:
F INANCIAL HEALTH:
PROFITABILITY
LIQUIDITY
SOLVENCY
3 Factors in Fiancia l P lanning:
-Profitabi l i ty -excess of revenue over expenses
-L iquid i ty - convert asset to cash w/ ease
-Solvency- meet finacia l obl igat ions as they come
FINANCIAL HEALTH:
PROFITABIL ITY:
>Requi red at 3 leve ls-For Fi rm, prov ide cap i ta l investment ,
endure downward cyc le , susta in growth-For people , Rewards- For Owners - ROI
>Pro ject cyc le : Per form serv ices , invo ice, co l lec t cash
>Office Loss - due to fa i lure in one of i t .
FINANCIAL HEALTH:
LIQUIDITY:
> Fixed Asset (Long Term)- Real Estate, Car , Equipments
> Current Asset (Short term)- Cash
Key? Invoic ing regular ly
FINANCIAL HEALTH:
SOLVENCY:
>Feels the day to day effect of Profitabi l i ty & L iqu id i ty
>Solvency & Profitabi l i ty – c losely re lated
FINANCIAL HEALTH:
MANAGING CASH:
>Solvency is a problem
>Cash F low Project ion:- Forecast Bi l l ing- Forecast col lect ions,
other investments- Forecast payments- Combine & calculate
FINANCIAL HEALTH:
MANAGING CASH:
>Cash F low Controls : (Act ive)- cont inu ing flow of pro j- B i l l ing prompt ly- monitor receipts &
pursui t col lect ions- Contro l d isbursements- prepare cash budgets
FINANCIAL HEALTH:
MANAGING CASH:
>Cash F low Controls : (Act ive)- cont inu ing flow of pro j- B i l l ing prompt ly- monitor receipts &
pursui t col lect ions- Contro l d isbursements- prepare cash budgets
FINANCIAL HEALTH:
MANAGING CASH:
-Cont inu ing defici t so lut ion:- refinance a major asset- adding capi ta l- reta in earn ings than
distr ibute- Contro l d isbursements- defer expenditures
FINANCIAL HEALTH:
FINANCIAL STRENGTH:
>Working Capi ta l - min. amount to susta in the firm in bus iness
> Receivables- largest current asset
>Profit- 10-15%
FINANCIAL HEALTH:
MANAGING OVERHEAD:
- 30-40% of Revenues
- 100-200% of Di rect Salary
- Too High > No Profit
- Too Low > affects Ql ty
FINANCIAL HEALTH:
MANAGING PROJECT EXPENSES :
> D i rec t sa la ry , consu l tants , t rave l , rep ro , mode l s , e tc . d i rec t l y re la ted to Pro j .
> Impt Pr i nc ip l es :- U t i l i za t i on> keep ing s taff engaged in Pro j- Produc t i v i t y > Degree to genera te
revenue
Net Mu l t i p l i e r = Net Revenue / DSE
P3 = P3 / P1
FINANCIAL HEALTH:
O v e r h e a d E x p e n s e
T h e P r o fi t P l a n
- C o m p e n s a t e e m p l o y e e s- c a p i t a l- R e w a r d f o r t h e r i s k s
- B y p e r c e n t a g e- o r b y p r o fi t t a r g e t
I n d i v i d u a l P r o j e c t P l a n n i n g- R i g h t C l i e n t s & P r o j e c t s- A p p r o p r i a t e P r i c e- C o n t r a c t s- S t a ff w i t h Ta l e n t & E x p e r i e n c e- G o o d m a n a g e m e n t
FINANCIAL PLANNING:
Foster ing Creat iv i ty:
Accept New Ideas
Encourage Risk-tak ing & Fai lure
Al low indiv idual Efforts
MANAGING PEOPLE
Foster ing Creat iv i ty:
Provide Profess ional Growth
Reward Contr ibut ions
Communicate “Big Picture”
MANAGING PEOPLE
Determining the Need:
Adds to Fi rms’ capabi l i t ies & achieve pract ice
ADD, REPLACE, TRANSIT ION
Quest ions: NOW & FUTURE, Better & Br ighter , Most
Pos i t ive Impact
RECRUITING & HIRING
Determining the Need:
REVIEW- Bi l l ings, Work to be done, sk i l l s needed,
compensat ion, equipments
OPTIONS: Contractua l Serv ices, Loaned Employees
RECRUITING & HIRING
Rec ru i t i ng :
Emp loyee Re fe r ra l s f rom cu rren t S taff
Adve r t i s i ng
Un ive r s i t i e s
R E C R U I T I N G & H I R I N G
Rec ru i t i ng :
Search Fi rms & Ex te rna l Rec ru i te r s
Emp loyment Agenc ies
Ongo ing Rec ru i t i ng
R E C R U I T I N G & H I R I N G
Screen ing & In te rv iew ing :
Rev iew Resumes -S tandard o r open s ty le
S teps : App l i ca t ion Le t te r , Phone Ca l l , I n te rv iew
R E C R U I T I N G & H I R I N G
Screen ing & In te rv iew ing :
App l i ca t i on Le t te r :
1 . Comp le te & On -Time2 . Cove r Le t te r , Resume <Accura te3 . Expe r ience fi ts4 . Emp loyment H i s to ry Prog ress ion5 . Expec ta t ions match the Needs6 . Work Samp le Matches?7 . Compensa t ion Matches
R E C R U I T I N G & H I R I N G
Screen ing & In te rv iew ing :
Phone Ca l l - Ve r ifica t i on in De ta i l s
In te rv iew- Job - re la ted C r i te r i a
Fo l l ow -up Phone ca l l , Le t te r o r e -ma i l
( I f re jec ted ) B r ie f & Fac tua l
R E C R U I T I N G & H I R I N G
Se lec t i on :
Wr i t ten , o r ve rba l then wr i t ten
Le t te r- J ob Catego ry , wo rk scheud le , pay ra te , o the r benefits
B ig Fi rms - Handbook
R E C R U I T I N G & H I R I N G
Or ien ta t i on :
In i t i a l Days - de te rm ines l ong - te rm emp loyee < ca re fu l l y p l anned &
execu ted
In fo rm eve ryone fo r the newcomer
In fo rm M iss ion , Cu l tu re & Va lues
R E C R U I T I N G & H I R I N G
Or ien ta t i on :
In fo rm Marke ts & Pro jec ts
In fo rm In te rna l Resource & suppor t Se rv i ces
R E C R U I T I N G & H I R I N G
I n i t i a l Pe r iod :
3 -6 Months
Frequen t Feedback
Appra i sa l
R E C R U I T I N G & H I R I N G
Emp loyee < Impt . Resource < Re ten t ion i s mos t impt .
Sens i t i v i t y to Needs & Asp i ra t i ons
S T A F F D E V E L O P M E N T
Key fac to r s :
Recogn i t i on
Open Commun ica t ion
Job S tab i l i t y
H igh wages
S T A F F D E V E L O P M E N T
Superv i s ing :
He lp ind i v idua l t o succeed
Cha l l enge & Recogn i t i on
Cha l l enge - i nvo lve in “B ig P i c tu re”
S T A F F D E V E L O P M E N T
Superv i s ing :
Recogn i t i on< Pos i t i ve Feedback vs Nega C r i t i c i sms
Spec ific p ra i se
S T A F F D E V E L O P M E N T
Superv i s ing :
Commun ica t ion :
- I n fo rma l Eve ryday con tac t- Fo rma l Regu la r Mtgs
- Off-s i te re t rea ts-Soc ia l Even ts
S T A F F D E V E L O P M E N T
Per fo rmance Appra i sa l s : & Pro fess iona l Dev t
Appra i sa l - Looks Backwards-Pe r fo rmance vs J ob desc r ip t i ons
- Improves pe r fo rmance
Profl Dev t - l ooks a t Fu tu re- Growth
Tim ing - Regu la r- Once a /y r
- o r team rev iew
S T A F F D E V E L O P M E N T
Tra in ing , Learn ing & Pro fess iona l Deve lopment :
Re ten t ion advantage
Forms :Con fe rence Fees
Tu i t i on FeePro fess i ona l assoc . T ime
S T A F F D E V E L O P M E N T
Tr a i n i n g , L e a r n i n g & P ro f e s s i o n a l D e v e l o p m e n t :
P ro g r a m s :
M e n t o r i n g
I n - h o u s e P r o g r a m s - c o n t i n u i n g
o u t s i d e S e m i n a r s - b u d g e t / y r & r e p o r t b a c k
Tu i t i o n r e i m b u r s e m e n t - s e t b u d g e t & C r i t e r i a
I n t e r n D e v t P r o g r a m
C i v i c Pa r t i c i p a t i o n
S T A F F D E V E L O P M E N T
Tr a i n i n g , L e a r n i n g & P ro f e s s i o n a l D e v e l o p m e n t :
P ro g r a m s :
M e n t o r i n g
I n - h o u s e P r o g r a m s - c o n t i n u i n g
o u t s i d e S e m i n a r s - b u d g e t / y r & r e p o r t b a c k
Tu i t i o n r e i m b u r s e m e n t - s e t b u d g e t & C r i t e r i a
I n t e r n D e v t P r o g r a m
C i v i c Pa r t i c i p a t i o n
S T A F F D E V E L O P M E N T
Doesn ’ t C l i c k
Per sona l Reasons
For Othe rs
B IG IMPACT
T E R M I N A T I O N , L A Y O F F , A N D P E R F O R M A N C E I S S U E S
Vo lun ta ry Res ignat i on :
Par t i n Good te rms
2 weeks no t i ce
no t d i s suade i f someone i s dec ided
poss ib le ea r l i e r
Ex i t I n te rv iew
T E R M I N A T I O N , L A Y O F F , A N D P E R F O R M A N C E I S S U E S
Te rm ina t ion :
Not su rp r i se , i n fo rmed o f improv ing pe r fo rmance
P lanned meet ing
Ob jec t i ve reasons
f rom de fens iveness to Tea r s
Procedu res be fo re l eav ing
T E R M I N A T I O N , L A Y O F F , A N D P E R F O R M A N C E I S S U E S
Layoffs :
C runchTime
Cos t - cu t t ing -Be Hones t
Severance pay
T E R M I N A T I O N , L A Y O F F , A N D P E R F O R M A N C E I S S U E S
Per fo rmance Prob lems :
in fo rm> verba l o r Memo
1.S ta te I s sue2 .Emp loyee ’ s p t o f v iew
3 .Ask so lu t i on4 . Ag ree on Ac t i on P l an
5 . Se t T ime to rev iew
T E R M I N A T I O N , L A Y O F F , A N D P E R F O R M A N C E I S S U E S
Per fo rmance Prob lems :
Coach ing t ips :
Cour teous & Respec t fu lAc t i ve l i s ten ing
At tend to non -ve rba l cuesAvo id jump ing to conc lus i ons
Reach a Concensus
T E R M I N A T I O N , L A Y O F F , A N D P E R F O R M A N C E I S S U E S